Teletouch Reports Second Quarter 2013 Fiscal Year Results

FORT WORTH, Texas --(Business Wire)--

Teletouch Communications, Inc. (OTCBB: TLLE), a leading U.S. cellular
services provider and consumer electronics distributor, reported audited
consolidated results on Form 10-Q and announced financial results for
its second fiscal quarter ended November 30, 2012.

2nd Quarter Results - Financial

Total operating revenues of $5.00 million

Income from continuing operations of $0.06 million

EBITDA from continuing operations of $0.28 million

Net loss from continuing operations of $0.38 million

Year-to-Date Highlights - Financial (as reported)

Total operating revenues of $10.22 million

Income from continuing operations of $0.43 million

EBITDA from continuing operations of $0.88 million

Net loss from continuing operations of $0.49 million

Reduced total liabilities by $2.47 million

Material Subsequent Event - Settlement of Texas Sales Tax Obligation

On January 7, 2013, the Company entered into a settlement agreement
with the State of Texas ("State") related to the prior reported sales
tax obligation of its wholly owned subsidiary, Progressive Concepts,
Inc. ("PCI"), assessed following an audit of tax periods from January
2006 through October 2009;

The settlement reduced PCI's total sales tax obligation from
approximately $1.91 million to $1.41 million as of the settlement
date, i.e., approximately $0.50 million in penalties and interest will
be waived by the State once the tax obligation is paid pursuant to the
terms of the settlement, as further described below;

$625,000 down payment ($150,000 was prior paid voluntarily through
December 1, 2012, with the remaining $475,000 paid January 10,
2013);

Beginning February 15, 2013, PCI shall make 35 payments of $22,000
each month, with a final payment of $18,888 due January 15, 2016
(total of $788,888);

Total settlement obligation amount due is interest free;

All penalties and interest will be waived by the State after the
settlement obligation is paid in full;

As the settlement and related current obligation was agreed to (and
financed at zero interest) by the State prior to the Company's 2nd
quarter financials being released, $1.1 million of the total
obligation has been reclassified as a long term obligation on the
Consolidated Balance Sheet as of November 30, 2012.

"This year's quarter is not easily compared to last year's same period,
as we settled the AT&T litigation in late November 2011," stated T. A.
"Kip" Hyde, Jr., President, Chief Operating Officer and Director of
Teletouch. "For a more comparable view, adjusted EBITDA for the second
quarter was $0.29 million versus an adjusted EBITDA of $0.36 million for
the same period last year. Adjusted Operating Income increased to $0.07
million from an adjusted Operating Income of $0.03 million last year.
Our adjusted net loss from continuing operations decreased to $0.37
million from $0.59 million in the prior year's quarter. While
all-in-all, we maintained a reasonably comparable quarter, we are still
not where we need to be to drive solid top and bottom-line growth."

Hyde continued, "Although we expected to close our new senior credit
facility during the quarter, a requirement by our prospective new lender
to resolve the State of Texas sales tax obligation, and related ongoing
negotiations with our current lender, Thermo Credit on payment and
inter-creditor terms, have caused unexpected delays. We reached
favorable terms with the State in mid-December and completed the
settlement agreement in early January, but the negotiations with Thermo
Credit continue. At this point, Thermo must agree to terms acceptable to
our new lender for the new financing to move forward. We are optimistic
that both lenders will reach agreement shortly and our new financing
will be completed. However, at this point, we can just watch and wait."

"Meanwhile, our operations suffer each day that we do not have a new
credit facility in place to finance needed inventory purchases, expand
wholesale partnership opportunities, and support our cellular
operations. While we have faced some early challenges in executing on
our wholesale business growth plan, we remain committed to the
distribution business as the long-term growth engine for the Company. We
are working to focus this business unit on fewer key product lines and
generating larger customer relationships, in the expectation that these
activities will provide substantial growth, especially by leveraging our
expected new financing options."

Hyde added, "Until then, the cellular business remains the key income
driver of our operations. The rate of cellular subscriber attrition
remains within our expectations, but the ongoing subsidies required for
cellular phones used for subscriber contract renewals are straining our
liquidity. Of particular note, during the quarter, not only was the
iPhone 5 launched, but also the price of the iPhone 4 was significantly
reduced, which combined with the start of the holiday season, resulted
in substantially increased demand from our cellular subscribers for new
cellular handsets, increasing the negative impact on our cash and
earnings. Although the net present value of the required two-year
services contract renewal and related transfer value at the end of our
AT&T contract far exceeds the up-front subsidy on each handset, the
subsidized amount is recognized immediately, which negatively impacts
current earnings and cash. Until our new credit facility is in place, we
are actively monitoring subscriber upgrade activity and may have to
curtail certain subsidies and services over time."

Hyde concluded, "The delays in completing the new financing have clearly
impacted all areas of our business. We see many opportunities to grow,
but need the additional liquidity that a new credit facility will
provide in order to act upon them. At this point, it is clear that the
timing of an agreement between our new lender and Thermo Credit is not
within our control. Until then, we will continue to review all of our
corporate expense structures and look for available ways to improve our
overall profitability. However, we remain optimistic that a new facility
will be implemented in the relatively near future, and once put in
place, we expect to drive new sales growth through the back half of the
fiscal year."

EARNINGS CONFERENCE CALL:

The Company's fiscal second quarter 2013 earnings conference call is
scheduled on January 30, 2013, at 4:15 p.m. Eastern (3:15 p.m. Central).
To join, participants will call 866-901-2585 or
404-835-7099. Callers will be asked to provide their first and
last names, email address, company and/or financial institution name, as
applicable. Participants are advised to dial in approximately 10-15
minutes before the conference call is scheduled to begin. After
information is given to the operator, participants will be placed on
music-hold prior to the start of the call, then all added to call at
start. After the speakers conclude their prepared remarks, the moderator
will provide instructions to all calling participants on how to queue up
their questions.

For its second fiscal quarter ended November 30, 2012, the Company
announced the following results [the Tables below present selected
financial data, including certain non-GAAP measures; see Teletouch's
Form 10-Q for its quarter ended November 30, 2012, filed on January 22,
2013 for complete financials and additional information]:

Teletouch Communications, Inc.

(in thousands, except shares and per share amounts)

Three Months Ended

November 30

November 30

2012

2011

$ Change

% Change

Summary Operating Results:

Service revenue

$

3,411

$

3,853

$

(442

)

-11.5

%

Product sales revenue

1,592

2,422

(830

)

-34.3

%

Total operating revenues

5,003

6,275

(1,272

)

-20.3

%

Cost of service

(671

)

(941

)

270

-28.7

%

Cost of products sold

(1,675

)

(2,395

)

720

-30.1

%

Gross margin on service revenue

2,740

2,912

(172

)

-5.9

%

Gross margin on product sales revenue

(83

)

27

(110

)

(G)

Gross margin on total revenue

2,657

2,939

(282

)

-9.6

%

Operating income from continuing operations

59

8,440

(8,381

)

-99.3

%

Net income (loss) from continuing operations

(376

)

7,817

(8,193

)

(G)

Net loss from discontinued operations (F)

(48

)

(29

)

(19

)

65.5

%

Net income (loss)

$

(424

)

$

7,788

$

(8,212

)

(G)

Basic income (loss) per share of common stock from continuing
operations

$

(0.01

)

$

0.16

$

(0.17

)

(G)

Diluted income (loss) per share of common stock from continuing
operations

$

(0.01

)

$

0.15

$

(0.16

)

(G)

Weighted average shares outstanding:

Basic

48,742,335

48,739,368

2,967

0.0

%

Diluted

48,742,335

52,147,924

(3,405,589

)

-6.5

%

EBITDA, Adjusted EBITDA, Operating Income and Net Income (Loss)
from Continuing Operations Reconciliation:

Net income (loss) from continuing operations

$

(376

)

$

7,817

$

(8,193

)

(G)

Add back:

Depreciation and amortization

222

332

(110

)

-33.1

%

Interest expense

374

523

(149

)

-28.5

%

Income tax expense

61

100

(39

)

-39.0

%

EBITDA from continuing operations (A)

281

8,772

(8,491

)

-96.8

%

Adjustments:

Non-cash stock compensation expense

6

40

(34

)

-85.0

%

Severance costs

4

-

4

100.0

%

Litigation costs (AT&T arbitration) (C)

-

149

(149

)

-100.0

%

Gain on settlement with AT&T (D)

-

(10,000

)

10,000

-100.0

%

Management bonuses related to settlement with AT&T (E)

-

1,400

(1,400

)

-100.0

%

Total adjustments

10

(8,411

)

8,421

(G)

Adjusted EBITDA from continuing operations (B)

291

361

(70

)

-19.4

%

Adjusted Operating Income from Continuing Operations
Reconcilation:

Operating income from continuing operations

$

59

$

8,440

$

(8,381

)

-99.3

%

Total adjustments

10

(8,411

)

8,421

(G)

Adjusted operating income from operations (B)

69

29

40

137.9

%

Adjusted Net Income (Loss) from Continuing Operations
Reconciliation:

Net income (loss) from continuing operations

$

(376

)

$

7,817

$

(8,193

)

(G)

Total adjustments

10

(8,411

)

8,421

(G)

Adjusted net loss from continuing operations (B)

(366

)

(594

)

228

(G)

Notes:

(A) Teletouch's EBITDA means Net income (loss) from continuing
operations before depreciation and amortization, interest expense
and income tax expense. EBITDA is non-GAAP measure that the Company
believes allows for a more complete analysis of our results.

(B) Teletouch's Adjusted EBITDA, Adjusted operating income and
Adjusted net income (loss) from continuing operations means
EBITDA, Operating income and Net income (loss) from Continuing
Operations before non-cash stock compensation expense and
significant items that do not occur on a routine basis. These
adjusted measurements are non-GAAP measures that the Company
believes allows for a more comparative analysis of our results to
other periods.

(C) The Company's subsidiary, PCI, commenced binding arbitration
against AT&T on September 30, 2009. PCI commenced the binding
arbitration to seek relief for damages PCI had incurred as AT&T had
prevented PCI from selling the iPhone and other AT&T exclusive
products and services that PCI had been contractually entitled to
provide to its customers under its distribution agreements with
AT&T. The litigation against AT&T was settled on November 23, 2011.

(D) As a result of the settlement and release agreement that was
executed with AT&T on November 23, 2011, the Company recorded the
initial consideration of $10,000,000 as a gain, which was included
in the operating income on the Company's consolidated statement of
operations for the three and six months ended November 30, 2011.
The initial consideration was comprised of a $5,000,000 cash
payment and $5,000,000 credit against PCI's outstanding accounts
payable to AT&T.

(E) The Compensation Committee of the Company's Board of Directors
approved a bonus for executive and management personnel due to the
successful settlement of the litigation against AT&T in November
2011 and in light of the fact that no bonuses were awarded during
fiscal year 2011 due primarily to a decrease in earnings caused by
delays in this litigation outside of the Company's control.

(F) On August 11, 2012, Teletouch and DFW Communications, Inc.
entered into an Asset Purchase Agreement (the "APA") to sell
substantially all of the assets of the Company associated with the
two-way radio and public safety equipment business. The sale of
the business was approved by the Company's Board of Directors on
August 10, 2012, and the Company received approximately $1,169,000
of cash consideration for the sale of the assets of the two-way
radio and public safety equipment business.

(G) Percent change is not provided if either the latest period or
the year-ago period contains a loss.

Teletouch Communications, Inc.

(in thousands, except shares and per share amounts)

Six Months Ended

November 30

November 30

2012

2011

$Change

% Change

Summary Operating Results:

Service revenue

$

7,134

$

7,979

$

(845

)

-10.6

%

Product sales revenue

3,089

5,782

(2,693

)

-46.6

%

Total operating revenues

10,223

13,761

(3,538

)

-25.7

%

Cost of service

(1,340

)

(1,945

)

605

-31.1

%

Cost of products sold

(3,154

)

(5,767

)

2,613

-45.3

%

Gross margin on service revenue

5,794

6,034

(240

)

-4.0

%

Gross margin on product sales revenue

(65

)

15

(80

)

(G)

Gross margin on total revenue

5,729

6,049

(320

)

-5.3

%

Operating income from continuing operations

434

8,286

(7,852

)

-94.8

%

Net income (loss) from continuing operations

(487

)

7,102

(7,589

)

(G)

Net loss from discontinued operations (F)

(145

)

(86

)

(59

)

(G)

Net income (loss)

$

(632

)

$

7,016

$

(7,648

)

(G)

Basic income (loss) per share of common stock from continuing
operations

$

(0.01

)

$

0.14

$

(0.16

)

(G)

Diluted income (loss) per share of common stock from continuing
operations

$

(0.01

)

$

0.14

$

(0.15

)

(G)

Weighted average shares outstanding:

Basic

48,742,335

48,739,184

3,151

0.0

%

Diluted

48,742,335

51,967,097

(3,224,762

)

-6.2

%

EBITDA, Adjusted EBITDA, Operating Income and Net Income (Loss)
from Continuing Operations Reconciliation:

Net income (loss) from continuing operations

$

(487

)

$

7,102

$

(7,589

)

(G)

Add back:

Depreciation and amortization

446

612

(166

)

-27.1

%

Interest expense

778

1,050

(272

)

-25.9

%

Income tax expense

143

134

9

6.7

%

EBITDA from continuing operations (A)

880

8,898

(8,018

)

-90.1

%

Adjustments:

Non-cash stock compensation expense

167

291

(124

)

-42.6

%

Severance costs

24

1

23

2300.0

%

Litigation costs (AT&T arbitration) (C)

-

315

(315

)

-100.0

%

Gain on settlement with AT&T (D)

-

(10,000

)

10,000

-100.0

%

Management bonuses related to settlement with AT&T (E)

-

1,400

(1,400

)

-100.0

%

Total adjustments

191

(7,993

)

8,184

(G)

Adjusted EBITDA from continuing operations (B)

1,071

905

166

18.3

%

Adjusted Operating Income from Continuing Operations
Reconcilation:

Operating income from continuing operations

$

434

$

8,286

$

(7,852

)

-94.8

%

Total adjustments

191

(7,993

)

8,184

(G)

Adjusted operating income from operations (B)

625

293

332

113.3

%

Adjusted Net Income (Loss) from Continuing Operations
Reconciliation:

Net income (loss) from continuing operations

$

(487

)

$

7,102

$

(7,589

)

(G)

Total adjustments

191

(7,993

)

8,184

(G)

Adjusted net loss from continuing operations (B)

(296

)

(891

)

595

(G)

Notes:

(A) Teletouch's EBITDA means Net income (loss) from continuing
operations before depreciation and amortization, interest expense
and income tax expense. EBITDA is non-GAAP measure that the Company
believes allows for a more complete analysis of our results.

(B) Teletouch's Adjusted EBITDA, Adjusted operating income and
Adjusted net income (loss) from continuing operations means
EBITDA, Operating income and Net income (loss) from Continuing
Operations before non-cash stock compensation expense and
significant items that do not occur on a routine basis. These
adjusted measurements are non-GAAP measures that the Company
believes allows for a more comparative analysis of our results to
other periods.

(C) The Company's subsidiary, PCI, commenced binding arbitration
against AT&T on September 30, 2009. PCI commenced the binding
arbitration to seek relief for damages PCI had incurred as AT&T had
prevented PCI from selling the iPhone and other AT&T exclusive
products and services that PCI had been contractually entitled to
provide to its customers under its distribution agreements with
AT&T. The litigation against AT&T was settled on November 23, 2011.

(D) As a result of the settlement and release agreement that was
executed with AT&T on November 23, 2011, the Company recorded the
initial consideration of $10,000,000 as a gain, which was included
in the operating income on the Company's considated statement of
operations for the three and six months ended November 30, 2011. The
initial consideration was comprised of a $5,000,000 cash payment and
$5,000,000 credit against PCI's outstanding accounts payable to AT&T.

(E) The Compensation Committee of the Company's Board of Directors
approved a bonus for executive and management personnel due to the
successful settlement of the litigation against AT&T in November
2011 and in light of the fact that no bonuses were awarded during
fiscal year 2011 due primarily to a decrease in earnings caused by
delays in this litigation outside of the Company's control.

(F) On August 11, 2012, Teletouch and DFW Communications, Inc.
entered into an Asset Purchase Agreement (the "APA") to sell
substantially all of the assets of the Company associated with the
two-way radio and public safety equipment business. The sale of
the business was approved by the Company's Board of Directors on
August 10, 2012, and the Company received approximately $1,169,000
of cash consideration for the sale of the assets of the two-way
radio and public safety equipment business.

(G) Percent change is not provided if either the latest period or
the year-ago period contains a loss.

Selected Balance Sheet Highlights

(in thousands)

November 30,

May 31,

2012

2012

$Change

% Change

Cash

$

1,257

$

1,973

$

(716

)

-36.3

%

Current portion of Texas sales and use tax obligation

695

-

695

100.0

%

Current debt obligation

9,655

10,932

(1,277

)

-11.7

%

Long-term Texas sales and use tax obligation, net of current portion

1,062

-

1,062

100.0

%

Total liabilities

18,109

20,576

(2,467

)

-12.0

%

Current Assets

6,808

8,814

(2,006

)

-22.8

%

Current Liabilities

17,047

20,476

(3,429

)

-16.7

%

Working Capital

(10,239

)

(11,662

)

1,423

12.2

%

Disclosure of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted
accounting principles ("GAAP"). However, management believes the
presentation of certain non-GAAP financial measures provides useful
information to management and investors regarding financial and business
trends relating to the Company's financial condition and results of
operations, and that when GAAP financial measures are viewed in
conjunction with the non-GAAP financial measures, investors are provided
with a more meaningful understanding of the Company's ongoing operating
performance. In addition, these non-GAAP financial measures are among
the primary indicators management uses as a basis for evaluating
performance. For all non-GAAP financial measures in this release, we
have provided corresponding GAAP financial measures for comparative
purposes.

We refer to the term EBITDA, Adjusted EBITDA, Adjusted income/(loss)
from operations and "Adjusted net income (loss)" in various places of
our financial discussion. EBITDA is defined by us as net income/(loss)
before interest expense, income tax expense, and depreciation and
amortization expense. The Company identifies its non-cash, significant
and one-time charges each period, including non-cash stock compensation
expense and significant litigation or restructuring costs and excludes
these charges to compute certain non-GAAP adjusted operating
measurements. EBITDA, Income/(loss) from operations, and Net
income/(loss) are each adjusted by excluding the total non-cash,
significant and one-time charges identified by the Company to compute
Adjusted EBITDA, Adjusted income/(loss) from operations and Adjusted net
income/(loss), respectively (the "Non-GAAP Financial Measures"). The
Non-GAAP Financial Measures are not measures of operating performance
under GAAP and therefore should not be considered in isolation nor
construed as an alternative to operating profit, net income/(loss) or
cash flows from operating, investing or financing activities, each as
determined in accordance with GAAP nor should they be considered as a
measure of liquidity. Moreover, since the Non-GAAP Financial Measures
are not measurements determined in accordance with GAAP, and thus are
susceptible to varying interpretations and calculations, the Non-GAAP
Financial Measures, as presented, may not be comparable to similarly
titled measures presented by other companies.

About Teletouch Communications

For over 48 years, Teletouch
has offered a comprehensive suite of wireless telecommunications
solutions, including cellular, two-way radio, GPS-telemetry and wireless
messaging. Today, Teletouch is a leading Authorized Service Provider and
billing agent of AT&T
(NYSE: T) products and services to consumers, businesses and government
agencies, operating a chain of retail and authorized agent stores in
North and Central Texas under its "Hawk Electronics" brand, in
conjunction with its direct sales force, call center operations and
various retail eCommerce websites, including: www.hawkelectronics.com,
www.hawkwireless.com
and www.hawkexpress.com.

Teletouch's common stock is traded Over-The-Counter under stock symbol:
TLLE. Additional information about the Teletouch family of companies can
be found at www.teletouch.com.

All statements from Teletouch Communications, Inc. in this news release
that are not based on historical fact are "forward-looking statements"
within the meaning of the PSLRA of 1995 and the provisions of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. While the Company's
management has based any forward-looking statements contained herein on
its current expectations, the information on which such expectations
were based may change. These forward-looking statements rely on a number
of assumptions concerning future events and are subject to a number of
risks, uncertainties, and other factors, many of which are outside of
our control, that could cause actual results to materially differ from
such statements. Such risks, uncertainties, and other factors include,
but are not necessarily limited to, those set forth under the caption
"Risk Factors" in the Company's most recent Form 10-K and 10-Q filings,
and amendments thereto, as well as other public filings with the SEC
since such date. The Company operates in a rapidly changing and
competitive environment, and new risks may arise. Accordingly, investors
should not place any reliance on forward-looking statements as a
prediction of actual results. The Company disclaims any intention to,
and undertakes no obligation to, update or revise any forward-looking
statement.